Written by: Eric Bank
Edited by: Lillian Guevara-Castro
Reviewed by: Adam West
Key Takeaways
- The CFPB withdrew from a joint lawsuit against Credit Acceptance Corp., leaving the New York attorney general as the lone plaintiff.
- The pullback is one of several examples of the CFPB’s walking away from cases and backing off enforcement under the new administration.
- The move is the latest indication that the regulatory pendulum may be swinging to a more predictable place for subprime lenders after big changes at the CFPB.
The Consumer Financial Protection Bureau (CFPB) recently announced it has dropped its suit against Credit Acceptance Corp. (CACC), leaving the New York State case standing. The case will continue in New York without federal participants.
Credit Acceptance welcomed the news and reaffirmed its commitment to compliance and fair dealing. The company has emphasized how it helps over 5 million consumers get financing for cars. Some in the industry see the withdrawal as a sign of regulatory pressure easing.
The suit, filed in 2023, claimed that the company had overstated the prices of cars, hid finance charges, and originated loans that charged interest rates above New York’s usury limits. The CFPB’s pullback takes some of the legal weight out of the case, but doesn’t end it.
For subprime-focused lenders, it sounds like relief from the regulatory heat — at least in the near term.
CFPB Shake-Up Could Mean A New Chapter For Lenders
The issue with Credit Acceptance is only a slice of a larger trend. With President Donald Trump’s re-election in 2024, the CFPB has been scaling back enforcement under acting director Scott Bessent.
Other major cases closed by the bureau recently include those against Comerica Bank, Reliant Holdings, Capital One, and TransUnion, among others, American Banker reported. The changes also come on the heels of contested mass CFPB layoffs and a reorganization of staff internally.
This shift in direction could provide subprime lenders with a sustainable way forward as they expect fewer surprise enforcement actions. Lenders will be able to monitor risk and maintain sustainable operations that serve customers with credit challenges.
Industry Response: A Reason to Hope Cautiously
The financial industry greeted the CFPB’s retreat with applause. “We are pleased with the CFPB’s decision to withdraw from this case, which we believe never should have been brought in the first place,” said Erin Kerber, Credit Acceptance’s chief legal officer.
The original case was an “attempt to reverse well-settled law and invent new requirements that were contrary to existing statutes and regulations,” the American Financial Services Association wrote in a press release.
But that optimism is mixed with uncertainty. The regulatory landscape could shift yet again with a new leader or new political priorities. Subprime lenders, meanwhile, are holding their breath as they work to tighten their compliance operations, he said.
A Stabilizing Signal on Subprime Growth
The CFPB’s retreat comes as an increasing appetite for nonprime auto loans emerges. As traditional credit tightens, subprime lenders are filling a vital gap.
The reduced size of the lawsuit removes a shadow of uncertainty over Credit Acceptance and serves as a lesson to the industry that transparency and proactive compliance matters.
At the moment, the mood from Washington is one of more breathing room. But as always, subprime lenders know to keep an eye out for which way the wind is blowing.
